"$2,500 - $4,000/OZ. UNLESS DEBT/DEFICIT IS SLASHED" SAY THE INFLATION DECEPTION AUTHORS
THE WISDOM OF BUYING BIG PRICE DIPS
1.3.12 -- A new stage in the decade-long march toward the gold standard is set to begin in 2012.
"Gold's healthy 20% correction back to $1,550/oz. last month should not surprise anyone paying attention to market fundamentals," said Swiss America Chairman Craig R. Smith last month.
Mr. Smith remains confident the 21st century rush toward a new gold standard and away from a debt-driven culture is far from over, "A 25% correction back to $1,425/oz. could occur, however, the strong fundamentals driving this flight to safety should continue to propel gold prices above $2,000/oz. in 2012."
"Expect $100/oz. daily movements in gold prices," Mr. Smith said last week. "Buy on the dips when others are selling. Remember, 2011 was just the half-way point in a powerful, 20-year marathon bull market cycle."
This is only the third time in a decade that gold prices have dipped over 20% (In 2006; 22%, in 2008; 25%). The brilliant yellow metal still rose over 10% in 2011. This recent correction is the 9th major gold price dip since 2003, with an average rebound of 36% following the dip. If this pattern repeats, the next stop for gold is $2,200/oz.
Gold prices have risen dramatically in recent years based on safe haven buying by individuals and institutional buying as well as ETFs and other short-term speculators. Investors around the globe are diversifying their assets into the world's safest asset, gold, the new standard for measuring currencies worldwide.
Back in 2009, gold prices topped $1,200/oz. in December, then corrected back to $1,060/oz. in February 2010, a 14% correction. Most "experts" predicted gold prices had topped. They were wrong. Just like they were when gold prices hit $850/oz. in 2008 and $500/oz. in 2005.
To long-term thinkers and investors this is yet another smart buying opportunity.
Do not be distracted by media hype over gold's recent price correction or talk about a new gold "bubble". Instead, keep your eyes on the facts and your focus on the fundamentals. The above 10-year gold chart illustrates nine major gold price corrections in this bull market since 2003:
1. 2003 - Gold at $382 dropped to $319 (-16%)
2. 2004 - Gold at $425 dropped to $375 (-13%)
3. 2005 - Gold at $536 dropped to $489 (-9%)
4. 2006 - Gold at $725 dropped to $560 (-22%)
5. 2007 - Gold at $841 dropped to $778 (-8%)
6. 2008 – Gold hit $1002 on Mar 17 then dropped to $746 on 9-11-08 15 (-25%)
7. 2009-10 - Gold hit $1215 on Dec 7th then dropped to $1,060 on 2-4-10 (-14.6%)
8. 2010-11 - Gold hit $1,425 in Dec. 2010, then dropped to $1,315 on 1-27-11. (-8%)
9. 2011- Gold hit $1,900 in Aug. 2011, then dropped to $1,545 on 12-29-11. (-20%)
Following each of the last EIGHT major corrections, gold prices have risen an average of 36%.
"Now is an excellent time to buy! If the gold market continues in the same pattern witnessed over the last decade, the price dip in August 2011 may be one of the last opportunities to buy gold below $2,000/oz. Reports of gold's 'death' over the last decade have not only been greatly exaggerated, but will again be proven wrong. Central banks from Bangkok to Boston are printing money, therefore the worst is ahead for the dollar and the best is ahead for gold owners," said author and Swiss America Chairman Craig R. Smith.
NEXT MAJOR STOP: $2,000 GOLD
Gold prices are pointed toward new heights above $2,000 an ounce in the very near future. The economic uncertainty created by the U.S. credit rating downgrade by S&P has boosted central bank, institutional and individual investor demand for physical gold.
In July 2011 gold sales worldwide surpassed the previous six months combined. Savvy investors understand gold is the ultimate currency and store of value in a world awash in debt, led by the U.S. government, Federal Reserve and several EU countries.
Former Fed Chairman Alan Greenspan told CNBC recently, "there is no chance of a U.S. default" because the Fed can print unlimited amounts of money to prevent it - in essence, to attempt inflating the debt crisis away.
"In July gold prices crossed $1,600 an ounce, the two-thirds mark toward reaching a new, true inflation-adjusted high of $2,400+ an ounce," says Craig R. Smith. "Gold, priced in declining paper currencies, is telling the truth about the geopolitical economic realities the world faces and the miserable condition of both Europe and America's fiscal houses."
Using the government's official (and far-understated) Consumer Price Index CPI Index, $1600/oz. gold equates to $595/oz. gold price in 1980, after adjusting for inflation. That's a difference of $1,000/oz., illustrating that gold will NOT surpass a 'real' high until the price tops $2,400 an ounce.
Artificially low official government inflation data is a key political/economic tool used to fool the public into accepting the new "Inflatocracy", which is detailed in the new book, The Inflation Deception: Six Ways Government Tricks Us...And Seven Ways to Stop It!, by Craig R. Smith and Lowell Ponte.
"How many Americans would buy gold this very moment if they knew the 'REAL price' was just $595 to $682 an ounce?" asks Mr. Smith.
Amid widespread speculation about whether the decade-long bull market in commodities and precious metals can continue, The Inflation Deception authors Craig R. Smith and Lowell Ponte are now convinced gold prices are destined to rise above $2,500 to $4,000 an ounce over the next decade unless government slashes spending and debt.
Political and economic confusion is rampant among both investors and commentators as to where the safest place to park assets is right now. Gold is being called a "bubble", "non-money," while stocks and bonds are touted by financial networks and even our Fed Chairman Bernanke as "safe havens".
"Nothing could be further from the truth! Paper currencies are in an accelerating race to the bottom as nations push their debt limits to astronomical highs," say Smith and Ponte.
21ST CENTURY TSUNAMI OF DEBT = GOLD RUSH!
"Ironically, it is profligate government spending which virtually guarantees gold prices will double again over the next decade," says Mr. Smith. "Just do the math!"
Smith believes gold is currently priced fairly in comparison to our national debt levels, with a slight added risk premium. "In 1999, for example, our national debt was $4 trillion; 12 years later we are at $17 trillion (once the debt ceiling is raised), which is more than a four-fold increase. In 1999 gold prices traded at $300 an ounce; 12 years later we are at $1,700 an ounce, which is more than a five-fold increase."
According to U.S. government statistics, the national debt was $370 Billion in 1970 and nearly tripled to $907 Billion by 1980. Gold traded at $38.90 in 1970, yet climbed to a high of $850 in 1980, over a twenty-fold increase.
The 1979-80 gold rush exemplifies a temporary geopolitical and inflation-induced price bubble. This unprecedented convergence of factors driving gold in 1979-80 included; the Russian invasion of Afghanistan, the Iranian hostage/oil crisis and double-digit inflation under President Carter. By 1981 these crises were well under control, thus gold prices leveled off near $400 an ounce.
We are NOT in a gold price bubble today. For "gold bubble" talk to be valid, prices would need to rise twenty-fold from the 1999 level ($300/oz.) to over $6,000 an ounce.
Today gold prices are an accurate barometer of unsustainable spending and the debt now undermining the U.S. Dollar as the world's reserve currency and as a reliable store of value.
"As the numbers illustrate, gold should rise to at least $2,640 an ounce just to keep pace with guaranteed government spending increases," says Smith. "In 2011 our national debt will be $17 Trillion and will increase at $1.5 Trillion per year (or $15 trillion over the next decade). If we use the most conservative proposals of cutting $400 Billion per year from the deficit ($4 Trillion 2011-2021), we still arrive at $28 trillion in 2021. A 65% increase."
Gold prices at $1,700 an ounce should rise another $900 (52%) an ounce just to keep pace with the debt increase.
GOLD IS MONEY! COMMON SENSE UNCOMMON
Congressman Ron Paul asked Mr. Bernanke if he thought gold was money. Mr. Bernanke hesitated, then flatly said "No," nor does he think that U.S. Treasuries are money.
"But if gold is not money, then what IS money? Paper? Debt?" ask Smith and Ponte. "Without a universal standard for a money system, how in the world do we establish the value of anything?"
"Running an economy on undefined 'money' is an example of gambling on the 'bigger fool theory'," said Smith. "This is a terribly reckless way to run a country which controls the world's reserve currency."
As Thestreet.com commented on 7.18.11: "Short of B.S. Bernanke starting to walk around with a neon sign hanging around his neck saying 'Buy Gold,' it is impossible for ordinary investors to get any clearer warning that 'cash is trash' and physical metal are 'golden.' Ignore such a warning at your own peril."
"Mr. Bernanke's Fed has lost control of the economy and Ben is flying by the seat of his pants in pursuing a very dangerous path," say Smith and Ponte, as they warn in "Crashing the Dollar" and "The Inflation Deception."
7 SOLUTIONS TO RISING DEBT AND GOLD PRICES
"Keep in mind that given the level of angst over sovereign debt defaults both in Europe as well as in the U.S., gold prices could run up $1,000 an ounce virtually overnight unless serious national austerity programs can reverse the tsunami of red ink now encircling the globe," says Mr. Smith.
For three decades Mr. Smith has advised Americans to buy physical gold as "wealth insurance" -- for safety first, then growth. Starting in 2009 he added: "Owning physical gold is now a necessity, not a luxury. Buy gold, then hope and pray the price declines, because that would indicate the U.S. debt and deficits are shrinking and our currency is strengthening."
In The Inflation Deception: Six Ways Government Tricks Us...And Seven Ways to Stop It! Mr. Smith and co-author Lowell Ponte explore several variations on how to go about returning to a gold standard, as a nation and as individual citizens, before the new "Inflatocracy", led by Fed Chairman Ben Bernanke and the Obama Administration, crash the dollar and further exacerbate today's "debt threat."
Call your Swiss America broker at 800-289-2646 to discuss how to put yourself on a gold standard now, while prices are still below $2,000 an ounce.